Microsoft Offers 14 Consecutive Annual Dividend Hikes (MSFT)
By: Ned Piplovic,
The Microsoft Corporation (NASDAQ:MSFT), the publicly traded company with the highest current market capitalization, has rewarded its shareholders with nearly a decade and a half of consecutive annual dividend hikes and currently offers a 1.72% dividend yield.
The company’s current dividend yield of 1.72% is lower than the 2.5% to 3% minimum yield that income investors generally seek. However, Microsoft’s moderate yield offers support from the company’s steadily rising share price to offer a double-digit-percentage total return over the past 12 months and triple-digit-percentage total returns over the most recent three- and five-year periods. Furthermore, while lower than average yields of the overall market or sectors with high yields, MSFT’s current yield outperforms the average yields of its peers in the Technology sector by a significant margin.
Therefore, investors looking for a stable stock that supports strong capital growth with moderate dividend income should conduct their own due diligence to evaluate whether MSFT fits their investment portfolio strategy. Whether interested in taking a new position or expanding on an existing position, interested investors should act before the company’s February 20, 2019, ex-dividend date. Establishing MSFT stock ownership prior to that date will guarantee investors eligibility to receive the next round of dividend distributions on the March 14, 2019, pay date.
Microsoft Corporation (NASDAQ:MSFT)
Founded in 1975 and headquartered in Redmond, Washington, the Microsoft Corporation develops, licenses and supports software products, services and devices worldwide. The company’s Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, including Office, Exchange, SharePoint, Skype for Business, and related Client Access Licenses (CALs). Additionally, this segment provides consumer productivity Office suite of applications, as well as the Office 365 consumer services, such as Skype, Outlook.com and OneDrive. The Dynamics segment provides business applications for financial management, enterprise resource planning, customer relationship management, supply chain management and the LinkedIn online professional network.
The Intelligent Cloud segment licenses server products and cloud services, such as Microsoft SQL Server, Windows Server, Visual Studio and System Center as well as Azure, a cloud platform with computing, networking, storage, database and management services. Additionally, this segment provides the Premier Support and Microsoft Consulting enterprise services, which assist in developing, deploying, and managing Microsoft server and desktop solutions. Training and certification to developers and IT professionals on Microsoft products are also part of the Intelligent Cloud segment. Microsoft’s More Personal Computing segment comprises licensing of the Windows operating system to Original Equipment Manufacturers (OEM), patent licensing, Windows Internet of Things, MSN display advertising and Windows Phone licensing. Additionally, this segment designs and manufactures electronic devices that include the Microsoft Surface tablet devices, phones and PC accessories, as well as search and advertising through the company’s Bing and Bing Ads platforms. This segment also provides gaming platforms, including Xbox hardware, Xbox Live and video games.
The company’s current $0.46 quarterly dividend distribution represents a 9.5% boost over the $0.43 quarterly dividend amount from the same period last year. This new quarterly payout corresponds to a $1.84 annualized amount and currently yields 1.72%. The current yield is 21% lower than the company’s 2.2% yield average over the past five years, despite a streak of consecutive annual dividend hikes during the same period. The compounded impact of the past five annual dividend hikes is a 60% growth of the total annual dividend payout amount. While those dividend hikes represent significant growth, the company’s share price advanced nearly three times faster over the same period, which has suppressed the current yield.
However, MSFT’s current 1.72% yield outperforms the 1.18% average yield of the overall technology sector by more than 45% and the 0.48% simple average yield of the companies in the Application Software industry segment by more than 250%. Furthermore, Microsoft’s current 1.72% yield is also nearly 8% above the 1.59% simple average yield of only dividend-paying companies in the Application Software segment.
Since beginning the current streak of 14 consecutive annual dividend hikes in 2006, Microsoft has enhanced its total annual dividend payout nearly six fold. This level of dividend advancement is equivalent to an average growth rate of 13.3% per year.
The combined benefits of the long streak of dividend hikes and the robust asset appreciation translated into an 18.8% total return on shareholders’ investment over the past 12 months. Additionally, shareholders more than doubled their investments over the past three years with a 113% total return and more than tripled their money with a total return of 212% over the past five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.